Qualcomm Inc. is putting the value of its patent portfolio on the line in a California courtroom in its hometown to try to make Apple Inc. pay for using technology the chipmaker credits for the iPhone’s commercial success.
It’s the first time a U.S. jury will have a say in the two-year, sprawling global battle between the tech giants. Qualcomm alleges that Apple infringed patents related to technology for graphics processing and battery power conservation, which the San Diego-based company says improve the efficiency and reduce the cost of smartphones.
“Qualcomm could really use a win to bolster the view that its robust patent portfolio is entitled to protection,” said Bloomberg Intelligence analyst Tamlin Bason. But he added that, because Qualcomm is unlikely to get a court order banning sales of infringing iPhone models, the chipmaker may not gain much leverage against Apple if it wins the trial.
Even if it loses, Apple can shrug off virtually any damage award, according to Bason, but a verdict for the iPhone maker would weaken Qualcomm’s hand.
Qualcomm has lost billions of dollars in revenue after Apple, through its Asian manufacturers, stopped paying patent royalties in 2017. The chipmaker had been the exclusive supplier of cellular chipsets for the iPhone for five years, but a “truce” between the companies unraveled in 2016 and Apple switched to Intel Inc. for these chips. The chipmaker has accused Apple of instigating regulatory actions against it around the world and of lying to government officials.
Their fallout has spawned dozens of court cases on three continents, with neither side so far scoring a decisive victory. Courts in China and Germany in December banned sales of some iPhone models after finding that Apple infringed Qualcomm patents, but neither injunction covers Apple’s most recent iPhone models.
Those decisions haven’t forced Apple to settle its numerous disputes with Qualcomm even as the Cupertino, California-based company is facing slowing demand for its iconic phones. The chipmaker is also trying to get the U.S. International Trade Commission to ban imports of iPhones with infringing Intel chips, but a commission judge last year recommended against the request even though he agreed that one of Qualcomm’s patents in the case was infringed.
The two ITC cases—in so far as they theoretically still present a risk of an import ban for Apple—are among four cases that are most likely to produce a shift in the companies’ bargaining positions, Bason said. Another is a lawsuit Apple brought in January 2017 challenging Qualcomm’s licensing practices. That case is scheduled for trial next month with billions of dollars in damages at stake.
The fourth crucial case is the U.S. Federal Trade Commission’s antitrust lawsuit against Qualcomm in San Jose, California, that went to a nonjury trial in January. Qualcomm is awaiting a judge’s ruling on the agency’s allegations that it illegally used its position as the biggest provider of chips used in smartphones to extract billions of dollars in licensing fees.
Apple and its manufacturers are unlikely to settle with Qualcomm until they know how the FTC case will affect Qualcomm’s licensing practices, according to Bason.
The chipmaker’s strategy in the patent case headed for trial Monday is to demonstrate that its technology has a much broader reach than the iPhone maker has argued. Apple claims that Qualcomm uses its patents for basic mobile telecommunications functionality to demand royalties that far exceed the contribution this technology makes to Apple’s increasingly sophisticated products.
Qualcomm, which has 130,000 patents and patent applications, maintains that the whole industry benefits from its inventions beyond the standard-essential technology to connect to a telecom network. The company is using the patent litigation to try to prove that its other intellectual property contributes significantly to the iPhone.
“Qualcomm’s technologies enable the cellular ecosystem that allows smartphones to send and receive vast amounts of data and voice communications at rapid speeds, seamlessly and reliably, from anywhere within reach of a cellular network,” the company said in a 2017 court filing. “Qualcomm’s inventions are necessary for the entire cellular network to function, they are not limited to technologies in modem chipsets or even cell phones.”
The case is Qualcomm Inc. v. Apple Inc., 17-cv-01375, U.S. District Court, Southern District of California (San Diego).
